Openserve is taking the fight to Vumatel with higher network investments and a big increase in homes connected.
Vumatel is South Africa’s fibre-to-the-home (FTTH) leader, with 1.5 million homes passed and 450,000 connections. Openserve, in comparison, passes 890 000 homes with 414,847 connections.
Openserve used to be the biggest FTTH provider in South Africa. However, it scaled back on its fibre rollouts in 2018 and 2019 after Telkom decided to focus its investments on its mobile network.
Telkom cut its fibre network capital expenditure (Capex) from over R2 billion per annum in 2016 and 2017 to R1.2 billion in 2018 and R703 million in 2019.
These cutbacks allowed Vumatel to overtake Openserve as the top fibre-to-the-home network in South Africa.
Telkom realised it was a strategic mistake and ramped up its fibre network investment over the past two years.
Over the last year, it increased homes passed by 52.7%, while homes connected increased by 38.4% year on year.
Telkom invested R2.052 billion in its fibre network in the last financial year, significantly higher than the R1.14 billion the previous year.
The 80% annual fibre Capex increase helped Openserve to achieve the fastest annual fibre-to-the-home rollout it has ever recorded.
The chart below shows Telkom/Openserve fibre capital expenditure over the last seven years.
The rapid increase in homes passed has caused Openserve’s connectivity rate to decline from 51% to 46% over the last year.
It was expected. When Openserve slowed its fibre rollout in 2019 and 2020, its connectivity rate increased from 31% to 48%.
When it accelerated its rollout in 2021/2022, its connectivity rate declined by 5%.
Connectivity rates are closely linked to the time after a fibre deployment, so, with time, the number of connected homes will catch up with the number of homes passed.
Vumatel, now FibreCo, a force in the fibre market
Although Telkom, through Openserve, is increasing its investment in fibre, it faces a formidable opponent.
Vumatel and DFA recently combined their fibre assets under a new infrastructure company FibreCo.
Vodacom is set to acquire a 30% stake in FibreCo and combine its fibre assets with Vumatel and DFA.
With deep pockets and aggressive rollout targets, the new company is rapidly growing its fibre footprint.
Over the past year, Vumatel and DFA increased their combined capital expenditure from R3.127 billion to R3.617 billion.
The 16% increase in capital expenditure has helped FibreCo’s fibre network to pass 1.5 million homes and 297,000 commercial premises.
DFA has a fibre network of 13,800km, while Vumatel has over 30,000km of fibre assets. They connect 450,000 homes, 22,000 commercial buildings, and 20,000 mobile sites.
Vumatel also has a 48% stake in Herotel which plans to reach 440,000 homes passed. Herotel currently has 65,000 fibre customers and 71,000 wireless subscribers.
Vumatel plans to increase its stake in Herotel to 100% and use the operator to provide affordable broadband access to less affluent households in smaller towns and secondary cities.